Drewry: Asia-US Rates Recovering ahead of Contract Season

Although spot rates recovered in the Asia-US East Coast trade in the past few weeks, on the back of a demand growth in 2017, they remain well below the same period last year, according to Drewry.

Container shipments from Asia to the US East and Gulf coasts grew by a stellar 7.9% in 2017, far outpacing imports to the West Coast, which mustered a mere 1.3% uplift, Drewry cited data from PIERS.

The mismatch in the growth rates saw the East/Gulf ports increase their share of the market to 34.4%, up from 33% in 2016. The shift in the coastal balance eastward has been a constant trend in the past five years, but having slowed in 2016 it reasserted itself last year following the expansion of the Panama Canal mid-2016 that spurred lines to upgrade ships on that route.

Combined flows from Asia to all US coasts surpassed 15 million TEU last year, rising by 3.5% against 2016. When data for the faster growing Canada and Mexico markets becomes available, Drewry expects the annual rate for the total eastbound Transpacific to inflate to just shy of 6%.

Additionally, headhaul Transpacific volumes are expected to increase again this year, but at a slightly lower rate of around 4.5% with East and Gulf coasts taking further bites out of the West Coast’s dominance.

Despite the mostly supportive conditions, spot rates on the trade have been trending down for over a year, indicative of cut-throat pricing activity. Drewry said that there is likely to be further competitive friction if SM Line fulfills its plan to launch its first all-water USEC service by May 2018.

“Nonetheless, there has been some respite from the price erosion for carriers with representative 40ft spot rates adding around USD 1,000 since the start of January,” the shipping consultancy said.

“There is more room for growth before Chinese New Year when demand spikes, but the extent of the inevitable fall-off after CNY will depend on both carriers’ capacity management and pricing discipline with the final resting point setting the benchmark for annual contract negotiations.”

Carriers face an uphill battle as even after the recent upturn, spot rates remain nearly 20% down on mid-January 2017.

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